InvestorQ : Is the Reliance Industries really moving from being an oil and gas company to being a telecom and retail company? DO you see that change happening in the near future?
Sam Eswaran made post

Is the Reliance Industries really moving from being an oil and gas company to being a telecom and retail company? DO you see that change happening in the near future?

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Moii Chavate answered.
4 weeks ago
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The most interest part of the Reliance quarterly results in the Sep-20 quarter is how digital and retail are becoming more central to the story of RIL compared to oil and gas. Here is what you need to know about the shift.

· The first story is about value shifting. One way to look at the shifting criticality of various businesses is to look at their potential valuations.

· RIL has done some recent stake sales in its digital subsidiary Jio Platform and its retail unit, Reliance Retail Ventures Limited or RRVL. As per the data disclosed by the company, Jio Platform is valued at $68 billion and RRVL at $58 billion.

· Then we come to the O2C or Oil to Chemicals business which includes refining, marketing and petchem. This is potentially valued at $75 billion. So the sum-of-parts of $200 billion for RIL looks to fit in. The big question is whether it is correct to give a 63% weight to retail and digital in an oil conglomerate?

· The shift is happening and it is visible in the numbers as to why this shift in value is justified. Look at the revenue mix and the EBITDA mix of these businesses separately. The major contributor to revenues was refining at 38% and retail at 24%.

· In terms of revenues, petchem and digital contributed 18% and 14% respectively. Clearly, retail heft is growing in overall revenues and that is evident.

· Trends from EBITDA are a lot more interesting and revealing. Out of EBITDA of Rs.20,885 crore, 40% contribution came from digital business while 29% came from petchem.

· Now we come to the real story. Refining and retail contributed 14% and 10% respectively. Digital appears to be clear leader in terms of bottom line generation going ahead.

Therefore, the moral of the story is that in the coming years, retail business under the RRVL banner is increasingly going to become decisive to top line. At the same time, the digital business under the Jio Platforms banner will become more significant to the EBITDA. This quarter has just confirmed that shift.

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